First to Phase 3! Whoopee?

Gilead Sciences(NASDAQ:GILD) announced positive phase 3 data for its lead hepatitis C drug yesterday, and its shares fell 1%.

That'll happen when a positive result was widely expected. And the fact that the trial wasn't in the primary genotype in the U.S. also contributed to investor apathy.

The trial tested sofosbuvir, formerly known as GS-7977, in patients infected with genotype 2 or 3 hepatitis C virus. Twelve weeks after a 12-week treatment with sofosbuvir and ribavirin, which is available as a generic, 78% of patients had undetectable levels of virus in their system. No patients receiving placebo were rid of their virus.

This is the first phase 3 data for an interferon-free treatment -- beating its closest rival Abbott Labs(NYSE:ABT) -- but genotypes 2 and 3 are easier to treat than the more-prevalent genotype 1. Vertex Pharmaceuticals' (NASDAQ:VRTX) Incivek and Merck's (NYSE:MRK) Victrelis both have to be taken with Roche's Pegasys or Merck's PegIntron.

Gilead has a few more phase 3 programs that need to wrap up before it can apply to the Food and Drug Administration for approval. There are two more trials in genotype 2 and 3 patients: one comparing sofosbuvir and ribavirin with interferon and ribavirin, and another in patients that have already failed interferon and ribavirin. There's also a trial in genotype 1, 4, 5 and 6 patients looking at sofosbuvir, interferon and ribavirin, essentially the same treatment regimen as Incivek and Victrelis.

Getting sofosbuvir approved in genotype 2/3 without interferon or genotype 1 with interferon will be helpful for Gilead, but the real key to unlocking the hepatitis C floodgates is an interferon-free treatment in genotype 1 patients.

For that to happen, Gilead is bringing in another drug, GS-5885. A phase 3 trial testing the combination of sofosbuvir and GS-5885 with and without ribavirin started last month. If the 12-week treatment is successful, the phase 3 program for the combo product could wrap up next year, putting an approval in 2014.

Of course, given the high expectations for the combo product, I'm not sure it'll move the needle all that much, either.